The lending landscape in Chicagoland is looking up, and that’s terrific news for agents and their clients.

“Currently we are seeing a large uptick in buyer sentiment,” said Tariq Khwaja, area manager at Citywide Home Mortgage. “Rates have started to come near three-year lows, and people are aware of it.”

Referencing a statistic that about 9.8 million more people become eligible for homeownership once rates fall completely into “the fives on everything,” he noted that the national average was around 6.1%.

“We’re a quarter of a point away from 10 million more people becoming eligible,” he explained. “As these markets are moving, people are getting excited. Somebody who was preapproved in summer and didn’t find a house is now being told that the same purchase price range could cost them $250 less per month. Everybody’s always excited to save several thousand dollars a year.”

Ben Cohen, managing director at Rate, said buyers continue to exercise caution as rates remain high. 

“With higher interest rates leading to increased monthly mortgage payments, many buyers are reevaluating their financial capabilities,” Cohen said. “As borrowing costs rise, buyers find their purchasing power diminished. Many potential buyers are postponing their purchasing decisions due to current mortgage rates (around 6.1% to 6.3%).”

Cohen said this presents a good opportunity to work with agents to develop targeted marketing content highlighting affordable housing options, as well as to provide educational resources about market trends and the potential for rate changes. These strategies can encourage buyers to stay informed and engaged even if they are not purchasing immediately.

“In times of uncertainty, buyers seek knowledgeable guidance,” Cohen said. “[We] can reinforce that image as a trusted source by sharing success stories, case studies and expert insights on navigating the changing mortgage landscape. Engaging potential buyers through social media platforms can also foster trust and connection.”

Eva Pawlus, senior mortgage consultant at Wintrust Mortgage, said many buyers have shifted from waiting on rates to drop. Instead, they are focusing on opportunity and strategy.

“They understand that rates are not going to go back to COVID rates and see that process of real estate climb up every year,” Pawlus said. “Many are moving forward to secure homes before prices climb further.”

Rate expectations are not uniformly affecting buyers, Pawlus observed. Rather, she sees a mix of buyer behaviors. Some continue to delay making a purchase, while others are finally prepared to buy.

“The strongest buyers are accelerating, not waiting,” she said. “Instead of trying to time the market, buyers are adjusting structure — using rate buydowns, ARMs and seller credits to make deals work.”

Rate improvements over 2025

Pawlus noted that rates are slightly lower than last year (6.11% as of Feb. 5, down from 6.89% at the same time in 2025) but remain elevated compared to previous cycles. She has seen a small spike among investment buyers, especially those making condo purchases in the city. They are taking advantage of rising rents and trying to buy so they can rent out units and seeking more flexible and creative lending options.

“We are seeing more seller-paid buydowns, expanded physician credit programs — we just rolled out 0% down for up to $2 million purchase for qualified physicians — and stronger bank portfolio products,” Pawlus said. “The best agents are partnering closely with lenders to lead with education and strategy. Some key advice is to focus on monthly payment comfort, not the headline rate, and exploring buydowns and ARMs.”

Cohen said the fluctuating rates are significantly influencing buyer behavior in the Chicagoland market, with a recent uptick in activity due to lower rates.

“Last year saw interest rates peak near 7%, which caused many potential buyers to hesitate,” Cohen said. “They opted to delay their purchasing decisions, preferring to wait and see how the market would evolve. Currently, the recent slight decline in interest rates has reignited buyer interest, leading to application levels’ surging to a three-year high.”

Khwaja said people are realizing that now is the time to make a decision, as winter months typically provide more flexibility regarding negotiating power, as opposed to the busy spring and summer months.

“The folks I have pushing through in this negative-10-degree weather are absolutely motivated and excited to do business right now,” Khwaja said. “It’s cold. Not many people want to deal with that, so you have to be super motivated. But as the rates come down now to multiyear lows, it does turn up the heat and turn up the search.”

Khwaja speaks with his agents two or three times a week, and many of those conversations involve prospective homebuyers who are returning to the market.

“It’s almost as if my agent partners are coming to me before some of my clients,” Khwaja said. “The clients know interest rates are moving and I can send them the updated preapproval, and they can find out the new payment. But before that’s happening, they’re talking to the Realtor, going, ‘Hey, we hear rates are starting to move. Let’s go look at more houses.’ All they know is that the rate market is moving and they’re going to get a better deal than they could, which means the payment is going to be even more affordable and they had better act now.”

Popular products

Khwaja said the non-QM markets have started to come back, where more buyers are doing no-doc, investor DSCR and bank statement programs. Investor activity is also picking up, though not necessarily corporate buyers.

“I’m seeing some clients that own five or 10 properties coming back to do the cash out, the FDR, no-docs or purchases,” Khwaja said. “I’m also seeing a lot of self-employed people coming back in the bank statement loans from those relationships. It’s a different piece of business that’s accelerating right now, because those people need to do those deals. They’re not the same as the 800-credit, W-2 that’s $600,000 a year, and ‘I want a $2 million house’ buyer.”

Cohen said non-QM loans are appealing because they can accommodate various income types such as self-employment income, bank statements and assets instead of traditional income verification. They typically allow borrowers to access loan amounts larger than conventional limits and may offer unique features such as interest-only payments or balloon payment structures.

“Many self-employed individuals struggle to meet income documentation standards for traditional loans,” Cohen said. “Non-QM loans offer them the flexibility to secure financing based on their actual cash flow.”

Cohen said adjustable-rate mortgages are also popular due to their lower initial interest rates compared to fixed-rate mortgages, particularly for buyers who expect to sell or refinance before the rate adjustment period. Buyers are also turning to FHA loans and conventional loans with low down-payment options, as well as VA loans and first-time homebuyer programs.

“Various programs offer down payment assistance and favorable loan terms, which is particularly enticing for first-time buyers navigating affordability challenges,” Cohen said. “Many of these programs include education and counseling, helping buyers make informed decisions.”

Pawlus said 7/1 and 10/1 ARMs are currently popular, as well as two- and one-year buydowns, physician loans and rehab loans.

“A lot of buyers were asking sellers for credits to cover the buydown so the rate would be reduced for the first and second year or one year, depending on which one they would choose,” Pawlus said of buydowns. “That helped them tremendously with elevated rates, the affordability and the payment. That would reduce the payment while they’re hoping that in the next two years there’s going to be a window to refinance that mortgage.”

Inventory and affordability crunches

Pawlus highlighted rising property taxes and insurance costs as factors affecting the overall purchasing power for buyers, while low inventory contributes to limited affordability in certain neighborhoods such as Lake View and Roscoe Village. As a result, agents should expect to see more non-QM creative financing and portfolio lending. Rehab loans will be key to buyers seeking to maximize their purchase power.

“As we continue to have inventory issues, strong rehab and construction product will be crucial,” Pawlus said. “There are properties that don’t make sense for flippers but would make sense for a homeowner who wants to rehab and live in the property.”

Cohen pointed to limited inventory and a high concentration of buyers as driving intense competition in the city, elevating prices and making affordability a major hurdle. 

“Suburban areas may present more affordable options compared to the city, making it easier for first-time buyers to enter the housing market,” Cohen said, warning that some suburbs may experience faster price growth.

“Buyers in Chicago often have a more optimistic view regarding future appreciation, pushing them to commit to purchase despite current price pressures,” Cohen said. “The pandemic has shifted some buyer preferences toward suburban living, resulting in higher demand for homes outside the city. Buyers are seeking larger properties with more outdoor space, changing the dynamics of lending as more households look to secure loans for these suburban homes.”

Khwaja said there’s still strong condo inventory in the city but that the competition is not as strong as it is for single-family homes in the suburbs. “In the condo market, there might be two offers on a place,” he said. “But in the suburbs, there could be six offers, and they’re going to be on a $700,000 house that’s going to go 8% over asking … price is what you pay, value’s what you get.”

Expert Sources

Ben Cohen

Rate

Eva Pawlus

Wintrust

Tariq Khwaja

Citywide Mortgage